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Tag: Energiewende

“Many hope that wind and solar power will eventually become economically competitive on large scale, leading the way to a global low-carbon economy. Are these hopes justified?”

November’s COP22 climate summit of Marrakech gave climate policy fresh tailwind, after the blow of Donald Trump’s election. Even without a strong global treaty, national climate policies are multiplying — at least a certain type of policies. While the policy that economists often recommend — putting a price on greenhouse gas emissions — remains patchy, as a recent World Bank report shows, subsidies for renewable energy are booming: no fewer than 145 countries support renewables today. Germany’s Energiewende is a prominent, but not the only example: Obama’s Clean Power Plan features renewables as a centerpiece of climate policy, India’s National Solar Mission includes a 100 GW solar power target. In addition China is said to be considering a 200 GW target, and Morocco has announced the building of the largest solar power facility on the planet. Nearly half of all newly added electricity generation capacity was based on renewables. In ten countries, wind and sun deliver more than 10% of electricity consumed. These includes Denmark (43%), Portugal (24%) and Spain (23%).

Many hope that wind and solar power will eventually become economically competitive on large scale, leading the way to a global low-carbon economy. Are these hopes justified?

On the cost side, the economics of renewables look impressive. The costs of wind power have dropped significantly. On average, wind now generates electricity at $70–80 per Megawatt-hour (MWh) globally, as reported by the two international think tanks IRENA and IEA. Ten years ago, a roof-top solar array for a single family home cost more than $50,000 — today it sells for less than $14,000. (America’s LBNL and Germany’s Fraunhofer ISE provide more data.) Germany, which receives less solar radiation than southern Canada, now generates solar power at $90 per MWh. The United Arab Emirates have tendered a solar power station for $58 per MWh and recent auctions in Chile, Peru and South Africa have resulted in even lower prices.

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In some countries, wind and solar power are now cost-competitive with coal- and natural gas-fired power plants, even when carbon emissions are not priced. However, cost structures are very country-specific, and cost-competitiveness is not universal. Renewables tend to be cheaper where it is windy or sunny, where investors have access to low-cost finance, where fossil fuels are pricey, and where emissions are priced. In many places, however, coal-fired power plants remain the cheapest option for producing electricity, driving the renaissance of coal. Still, for renewables to have caught up with fossil plants in cost terms represents a huge success for wind and solar power.

Costs are, however, only one side of the competitiveness equation. The other is value. Merely comparing electricity generation costs between different plant types is misleading, as it ignores the fact that the economic value of electricity from different power stations is not the same. This is because on wholesale markets the price of electricity fluctuates from hour to hour (or even minute to minute). Some power plants produce electricity disproportionately at times of high prices (so called “peaking” plants), while others produce constantly at low prices (“base load” plants). This little detail has striking consequences for the economics of wind and solar power. Paul Joskow and Michael Grubb observed this a while ago.

In 2015 Germany enacted a law whose short title is the Renewable Energy Sources Act of 2014 (Erneuerbare-Energien-Gesetz, or EEG 2014). EEG 2014 formalizes the fundamental shift in energy policy in Germany, the Energiewende, from a coal and nuclear system to one which requires the mix of electricity generation in Germany to reach 40% – 45% renewable sources by 2025 and 55% – 60% renewable sources by 2035.

This is to be encouraged by feed in tariffs that guarantee prices for new renewable entrants while requiring grid operators to receive and purchase electricity from these sources. As expected, EEG 2014 met with some criticism, primarily a claim that it would be too expensive.

The cost of electricity to consumers increases through to 2023 by between one and two cents per kwh, but then declines at a rate of between two and four cents/kwh until 2035. In 2035 rates are forecast to be the same as 2015 – 8 to 10 cents/kwh.

By 2035 60 percent of German electricity will come from renewable energy sources, from about 28% today.

As the real costs for renewable generation decline, the primary drivers to the incremental costs of the German Energy Plan become the actual demand levels and the extent to which energy intensive industries are subsidized.

Investments in renewable energy increase through 2023 and then decline, however renewable energy’s share of the generation mix continues to rise.

The assumed generation mix that was used in the reference case for this study is presented in the figure below:

Note that the system average feed in tariff declines over time. Nonetheless, these tariffs are significantly higher than wholesale power costs from conventional sources. Under EEG 2014, transmission system operators (TSOs) are permitted to charge electric utilities an “EEG Levy” to compensate them for paying these feed in tariffs and the utilities pass these charges on to consumers.

The EEG Levy assumed in this analysis, along with the base cost of electricity, is shown in the following graphic.

Based on the assumptions inherent in this analysis, the overall cost of electricity to the consumer rises a few cents in the early 2020’s and then declines to rates comparable to rates experienced in 2010.

The Big Loophole

Not all consumers are subject to the EEG Levy, however. Many electricity intensive industrial and commercial end users have received exemptions from the EEG Levy, a point of considerable controversy in the country. Some 58 TWh are totally exempted and 110 Twh are partially exempted.

Most notably residential customers pay full freight. Were there less exemptions, the EEG Levy would be much lower, as shown in the figure below. No exemptions for any customer basically cuts the levy in half.

The EEG Levy cannot be viewed in isolation, however. No doubt, applying the levy to all industries would have some concomitant effect on the economy and some exempting is necessary. That said, however, even with loopholes, maintaining a relatively flat trajectory on consumer rates while radically increasing the renewable energy mix in electricity generation to over 60% will be quite an achievement.

Gerry Runte is Managing Director of Worthington Sawtelle LLC a consulting and research firm which provides a full portfolio of business planning and strategy services to both new and existing participants in emerging energy markets.

Gerry has 38 years of experience in the energy industry, much of which at the executive level. He holds a B.S. and M.Eng in Nuclear Engineering from Pennsylvania State University. Contact gerry.runte@worthingtonsawtelle.com; tel: +1 (207) 361-7143; skype: gerry.runte

Adding new jobs to the economy is always a good thing

In good times or bad, adding more jobs to the economy always equates to higher GDP, lower debt-to-GDP levels, lowered unemployment insurance expenditures, and higher revenues for governments from income tax and sales tax.

There are no examples where adding net jobs to an economy has resulted in a net loss to the economy

It’s positive for individuals too. Higher employment levels generally lead to higher incomes, small and large businesses notice increased revenue, and there is always the chance that companies may begin to expand their facilities and hire more staff to handle increased sales.

Which is why the case to add more renewable energy is so compelling

Over decades of time, mature industries have found ways to increase output with fewer employees.

In the Top 10 on the mature industry list, must certainly be hydro-electric power plants, followed by nuclear power plants, and gas-fired power plants. There we have astronomical installation costs and employment numbers — but once construction of the power plant is completed, only very low staffing levels remain to operate the power plant.

Which is very unlike the case with renewable energy. Why? Because once a multi-billion dollar hydro-electric dam is built, it’s built. You don’t need to build thousands of them per day.

It’s the same with multi-billion dollar nuclear power plants — all you need after the construction phase ends are a small number of highly trained people to monitor the various systems. And some security people. That’s it.

With solar panels, a factory must produce 1000 per day (or more, in the case of larger factories) every weekday. Suitable markets must be found, factories must be built/leased, production floors must be built, materials sourced, and the panels themselves must be designed and engineered, assembled, packed, shipped and accounted for. Accountants do what they must do, marketing people manage a steady train of media events, trade shows and advertising programs, and on and on it goes — and all of it is a part of the solar industry. That activity creates work for thousands of people, every workday of the year. (And that short description doesn’t begin to cover it)

Then there are the solar panel installers, the sales teams/estimators, and the companies that build the inverter systems, which is a whole other value chain.

The wind power industry can also make high employment/lower power plant cost claims — although wind turbines average about $1 million dollars each — as opposed to solar panels which mostly range from $10 each to $400 each, depending on their size and composition.

Renewable energy is hugely labour-intensive and many thousands of permanent jobs are created — quite the opposite of conventional power generation

There’s no doubt that global energy demand is growing, not only in the developed world, but in the developing world as well.

Each kind of energy (renewable and non-renewable energy) has it’s own pros and cons

One of them is that non-renewable energy requires far fewer person-years of employment over the lifetime of the power plant.

Renewable energy on the other hand, is a rapidly-growing manufacturing, installation, and marketing industry that requires evermore blue collar and white collar employees.

And now that solar power, wind power, and biomass power have reached — or are within months of matching (per kWh) price parity with non-renewable power plants — the question becomes;

Do we want to employ 1.3 persons full-time per MW, or do we want to employ up to 24 people full-time per MW?

For comparison purposes, the typical coal, gas, or nuclear power plant can supply 1000 MW (or 1 GigaWatt) of electrical generation capacity, while the average wind turbine can supply 1 MW each.

The average 1 MW wind turbine costs about $1 million apiece, so to get 1 GW of electrical generation capacity, you need to install 1000 of them (1000 x $1 million each = $1 billion total) and the installation and connection to the grid of that many turbines might take up to 24 months.

Each 1 GW installation of coal, gas, or nuclear power, costs well over $1 billion and can take up to 15 years to construction completion.

For example, the 2.4 GW nuclear power plant under construction in Vogtle, Georgia was originally planned to cost $14 billion, but due to construction and regulatory delays it may cost significantly more.

How much more, is difficult to say both in dollar cost and time frame.

At this point, the total cost may exceed $15.4 billion and it may take an extra year to complete — for a total of 2.4 GW of installed capacity over 11 years of construction and delays, at a total cost of $6.41 billion per GigaWatt. It won’t get any better than that, but it may get much worse.

The 10-year construction plan is already behind schedule by 14-months, and now faces an additional (up to) 18-month delay.

Southern Co. said the firms building its new nuclear power plant in Georgia estimate the project will be delayed 18 months, potentially costing the power company $720 million in new charges, company officials said Thursday. — ABC News

One point about Plant Vogtle (the official name of the plant) is that the two 1200 MW (1.2 GW) reactors are of the latest GE/Toshiba AP-1000 design, noted for their passive safety systems and many safety redundancies built into the power plant. If you’re going to build a nuclear power plant it might as well be the safest one!

As new capacity is added to global electrical grids, more of it is renewable energy

More utility companies are adding new renewable energy capacity as opposed to adding new non-renewable energy capacity due to faster installation time frames, fewer regulatory delays, the lack of fuel supply concerns going forward, and total installation cost per GigaWatt (GW).

It’s easy to visualize this in the chart below.

In 2013, of the 207 GW added to the world’s electrical grids — renewable energy accounted for 120 GW of new installations, while 87 GW accounted for non-renewable energy.

Once the 2014 numbers are released to the public, the renewable energy statistic will have improved over 2013’s numbers. And 2016 should easily surpass the 70/30 metric.

As renewable energy displaces non-renewable energy additions to the grid — remember that renewable energy gets only 1/4 of the subsidies that fossil fuel energy gets!

Imagine if renewable energy got the same subsidies per kWh, or per GigaWatt of capacity, as non-renewable energy

In practical terms, it would mean that 100% of all new generation would soon be renewable energy, everywhere that subsidy-parity was the law.

Also, the renewable energy manufacturing sector would need to quickly ramp-up to meet demand — meaning many hundreds of thousands of permanent jobs would be created immediately after the levelized subsidy was announced.

Between 2017-2019 — and even with the higher subsidies enjoyed by coal, nuclear, and oil & gas — it will cost less to install new renewable energy power plants than to install new non-renewable energy power plants.

Germany is one of the countries leading the transition to renewable energy

Due to German public pressure in the aftermath of the Fukushima-Daiichi incident in March 2011, Germany shut down nearly half of their nuclear power plants and were forced to accelerate their transition timeline to renewable energy.

This unexpected development created additional costs for Germany, but regardless, their Energiewende program is still a stunning renewable energy success story.

Although progress has slowed from the frenetic pace of 2011-2013, Germany is very much a world leader in the transition to renewable energy.

Renewable energy was the number one source of power generation for the first time ever.

Renewables gained slightly in 2014 and now comprise 27.3 percent of domestic demand.

There is no doubt that the world will transition to renewable energy, and even major oil companies like Shell and BP are in agreement that by the year 2100, almost 95% of all energy demand will be met by renewable energy.

In one scenario, Shell says that by 2060 the largest energy provider will be solar power.

How quickly that energy transition will occur — is what the present conversation is all about

However, air pollution is only one cost associated with fossil fuel use.

There are three main costs associated with energy

The retail price that you pay at the gas pump or on your utility bill for example(which is paid by consumers)

The subsidy cost that governments pay energy producers and utility companies(which is ultimately paid by taxpayers)

The externality cost of each type of energy(which is paid by taxpayers, by increased prices for consumers, and the impact on, or the ‘cost to’ the environment)

Externality cost in Europe and the U.S.A.

A recent report from the European Environment Agency (EEA) states that high air pollution levels (one type of externality) in the EU cost society €189 billion every year and it’s a number that increases every year. (That’s $235 billion when converted to U.S. dollars)

To put that number in some kind of context, the cost of the air pollution externality in the EU annually, is equal to the GDP of Finland.

Let’s state that even more clearly. The amount of taxation paid by EU taxpayers every year to pay for airborne fossil fuel damage is equal to Finland’s entire annual economic output!

It’s getting worse, not better, notwithstanding recent renewable energy programs and incentives. Even the admirable German Energiewende program is barely making an impact when we look at the overall EU air quality index.

“Of the 30 biggest facilities it identified as causing the most damage, 26 were power plants, mainly fueled by coal in Germany and eastern Europe.” — Barbara Lewis (Reuters)

“Each stage in the life cycle of coal—extraction, transport, processing, and combustion—generates a waste stream and carries multiple hazards for health and the environment. These costs are external to the coal industry and thus are often considered as “externalities.”

We estimate that the life cycle effects of coal and the waste stream generated are costing the U.S. public a third to over one-half of a trillion dollars annually.

Many of these so-called externalities are, moreover, cumulative.

Accounting for the damages conservatively doubles to triples the price of electricity from coal per kWh generated, making wind, solar, and other forms of non fossil fuel power generation, along with investments in efficiency and electricity conservation methods, economically competitive.

We focus on Appalachia, though coal is mined in other regions of the United States and is burned throughout the world.” — Full Cost Accounting for the Life Cycle of Coal by Dr. Paul Epstein, the Director of Harvard Medical School Center for Health and the Global Environment, and eleven other co-authors

The report also notes that electricity costs would need to rise by another .09 to .27 cents per kilowatt hour in the U.S. to cover the externality cost of American coal-fired electricity production.

The externality cost for solar or wind power plants is zero, just for the record

Dr. Epstein and his team notes: “Coal burning produces one and a half times the CO2 emissions of oil combustion and twice that from burning natural gas (for an equal amount of energy produced).”

There’s the argument to switch from coal to natural gas right there

Also in the Harvard report in regards to the intrinsic inefficiency of coal: “Energy specialist Amory Lovins estimates that after mining, processing, transporting and burning coal, and transmitting the electricity, only about 3% of the energy in the coal is used in incandescent light bulbs.”

“…In the United States in 2005, coal produced 50% of the nation’s electricity but 81% of the CO2 emissions.

For 2030, coal is projected to produce 53% of U.S. power and 85% of the U.S. CO2 emissions from electricity generation.

None of these figures includes the additional life cycle greenhouse gas (GHG) emissions from coal, including methane from coal mines, emissions from coal transport, other GHG emissions (e.g., particulates or black carbon), and carbon and nitrous oxide (N2O) emissions from land transformation in the case of MTR coal mining.” — Harvard University’s Full Cost Accounting for the Life Cycle of Coal report

It’s not like this information is secret. All European, American, and Asian policymakers now know about the externality costs of coal vs. renewable energy. It’s just that until recently everyone thought that the cost of switching to renewable energy, was higher than the cost of fossil externalities.

It’s not only an economic problem, it’s also a health problem

“Air pollution impacts human health, resulting in extra healthcare costs, lost productivity, and fewer work days. Other impacts are reduced crop yields and building damage.

Particulate matter and ground-level ozone are two of the main pollutants that come from coal.

90% or more of Europeans living in cities are exposed to harmful air pollution. Bulgaria and Poland have some of the worst pollution of the European countries.

An estimated 400,000 premature deaths in European cities were linked to air pollution in 2011.” — CleanTechnica

Externality cost in China

Remember the Beijing Olympics where the city’s industry and commercial business were shut down to allow visitors and athletes to breathe clean air during their stay (and Wow!) look at their clear blue sky for the first time in decades. Great for tourists! Bad for Beijing business and industry, with the exception of the tourism industry (for one month) of course.

The Common Language Project reported in 2008 that premature deaths in China resulting from fossil fuel air pollution were surpassing 400,000 per year.

“China faces a number of serious environmental issues caused by overpopulation and rapid industrial growth. Water pollution and a resulting shortage of drinking water is one such issue, as is air pollution caused by an over-reliance on coal as fuel. It has been estimated that 410,000 Chinese die as a result of pollution each year.” clpmag.org

The die is cast since it is becoming common knowledge that renewable energy merely requires a small subsidy to assist with power plant construction and grid harmonization — while fossil fuels continue to require truly massive and ongoing subsidies to continue operations.

Subsidy cost of fossil fuels

Want to add up the total costs (direct economic subsidy and externality cost subsidy) of fossil fuels?

Add the $600 billion global fossil fuel subsidy to the to the $2 trillion dollars of global externality cost and you arrive at (approx) $2.5 trillion dollars per year. Then there is the more than 1 million premature deaths globally caused by air pollution. All of that is subsidized by the world’s taxpayers.

Compare that to the total costs of renewable energy. Well, for starters, the economic subsidy dollar amount for renewable energy is much less (about $100 billion per year globally) and there are no externality costs.

No deaths. No illness. No direct or related productivity loss due to a host of fossil fuel related issues (oil spills, coal car derailment, river contamination, explosions in pipelines or factories) for just a very few examples.

The fossil fuel industry is a very mature industry, it has found ways to do more with ever-fewer employees, and it gets more subsidy dollars than any other economic segment on the planet.

By comparison, the renewable energy industry is a new segment, one that requires many thousands of workers and it gets only relative handfuls of subsidy dollars. And, no externalities.

It becomes clearer every day that high carbon fossil electricity power production must be displaced by renewable energy

No longer is it some arcane moral argument that we should switch to renewables for the good of the Earth; Fossil fuel is proving to be a major factor in human illness/premature deaths, it sends our money abroad to purchase energy instead of keeping our money in our own countries, and the wholly-taxpayer-funded subsidy cost of fossil is out of control and getting worse with each passing year.

The time for dithering is past. It’s time to make the switch to renewable energy, and to start, we need to remove the worst polluting power plants from the grid (and at the very least, replace them with natural gas powered plants) or even better, replace them with hybrid wind and solar power plants.

To accomplish this, governments need to begin diverting some of the tens of billions of dollars annually paid to the fossil fuel industry to the renewable energy industry.

Germany’s Energiewende program was (and still is) an admirable first step. Once Germany has completed it’s energy transition away from oil, coal and nuclear — having replaced all of that generation capacity with renewable energy and natural gas, only then can it be hailed a complete success — and German leaders should go down in history as being instrumental in changing the world’s 21st century energy paradigm.

If only every nation would sign-on to matching or exceeding the ongoing German example, we wouldn’t have 1 million premature deaths globally due to fossil fuel burning, we wouldn’t have almost 2 trillion dollars of externality cost, we wouldn’t need $600 billion dollars of direct subsidies for fossil fuel producers — and we would all live in a healthier environment, and our plant, animal, and aquatic life would return to their normally thriving state.

Taxes would reflect the global $2.5 trillion drop in combined fossil fuel subsidy and fossil fuel externality costs, employment stats would improve, productivity would increase, the tourism industry would receive a boost, and enjoyment of life for individuals would rebound.

It’s a truism in the energy industry that all energy is subsidized, of that there is no doubt. Even renewable energy receives tiny amounts of subsidy, relative to fossil.

But it is now apparent that over the past 100 years, getting ‘the best (energy) bang for the buck’ has been our nemesis. The energy world that we once knew, is about to change.

The world didn’t come to an end when air travel began to replace rail travel in the 1950’s. Now almost everyone travels by air, and only few travel by train.

And what about the railway investors didn’t they lose their money when the age of rail tapered-off? No, they simply moved their money to the new transportation mode and made as much or more money in the airline business.

Likewise, the world will not come to an end now that renewable energy is beginning to displace coal and oil. Investors will simply reallocate their money and make as much or more money in renewable energy.

One major impediment to the adoption of electric vehicles is the high cost of public charging stations for EV’s, as the charging units are very expensive.

Ubitricity.de has come up with a novel solution whereby ordinary streetlamps could be fitted with an electric vehicle charging point for the reasonable cost of 500 to 800 euros per streetlight, which is certainly more doable than the 10,000 euros of your typical EV public charging station in Europe.

Streetlamps in selected cities within Germany are now being fitted with a charging point allowing electric vehicle drivers to recharge their car battery.

Drivers prepay the cost of the electricity via Ubitricity to charge at these locations. Ostensibly, every streetlamp post and parking meter in Europe could be fitted with one of these charging points.

Not only do German drivers have the option of charging their EV’s at home, now they can now pick up a charge while they shop, have coffee with friends, or while they spend the day at their workplace.

“We are convinced there is room for this technology to be applied everywhere it’s needed, but we think that in most places there is a pressing need for investment in a charging infrastructure to allow the installation of charging points, not only here on lamp posts, but also in the workplace, at home and in underground carparks.

Governments are keen to cut the number of gas guzzling cars on the roads to reduce greenhouse gas emissions. Many are offering cash incentives to drivers to buy electric. But take-up has been slow partly due to the lack of charging stations.

There are lots of lamp posts which are already very well connected to the electricity network. Equipping a lamp post costs between 300 and 500 euros, depending on the circumstances at that location. When you consider the production price of our charging sockets, it is a long way from the 10,000 euros which must typically be invested in a charging station.” – Founder of Ubitricity, Frank Pawlitsche

All you need is an Electric Vehicle, your prepaid Ubitricity account and Ubitricity connector cable, and you’re set

Ubitricity portable, streetlight-attachable EV charging unit

The great thing about the Ubitricity parking spots with their electric vehicle recharging connector is that they’re normal parking spots with a charging port added. Your mobile phone app displays the Ubitricity locations.

You can park there all day and return to a car that is fully energized and ready to go! No more petrol stations for you.

It’s a wonderful idea. Streetlamps and parking meters are everywhere it seems and combining a parking spot with an EV charging port is a stroke of genius.

Boy those Germans are smart. Gut gemacht! (Well done!)

Driving electric is a cornerstone of Germany’s Energiewende energy policy

Only when driving on renewables will EV users avoid greenhouse gas emissions — not just locally but on a global scale. Renewable energies and EVs are natural partners of a sustainable energy and transportation sector. — From the Ubitricity website

All TESLA vehicles can access the Ubitricity chargers but don’t forget to bring your Ubitricity charging cable — unlike the TESLA SuperCharger stations where the cable is permanently attached to the SuperCharger unit.

A benefit of TESLA SuperCharger top-ups is that they usually take 10-15 minutes. Look, there’s a Starbucks!

Another benefit is that (TESLA Model S drivers only) enjoy free charging at TESLA SuperCharger stations for the life of the car because that’s what you get for 70,000 euros.

But once your TESLA is charged, you must return to move your car in order to let other TESLA drivers access the SuperCharger, much like gas-engined drivers can’t leave their car in front of the gas pump while they go shopping.

Only the Ubitricity solution gives all EV drivers a convenient parking spot — and a charge. The ability to simply ‘Park and Plug’ at one location in today’s crowded cities is a very big plus indeed.